Current News on Stelco Plan

Interesting article on the status of the current Stelco plan on the table for a vote today...courtesy of the Hamilton Spectator

Stelco offering voters new deal
Steve Arnold
The Hamilton Spectator9 December 2005
The Hamilton Spectator Final
A01Copyright (c) 2005 The Hamilton Spectator.

Intense negotiations have produced a new restructuring plan for Stelco. The latest proposal, the fourth plan this month aimed at ending nearly two years of bankruptcy protection, was approved yesterday by the board of directors. It goes to a vote of creditors today.
Previous plans had tried to satisfy two very different demands from bondholders. First, they wanted cash in addition to new debentures. Then, when a German steelmaker offered $4.8 billion for Dofasco, they demanded new shares that they could sell to any buyer in the market for Stelco.
This plan tries to satisfy both. Under it, Stelco creditors will get a pro-rated share of $275 million in new notes, more than $106 million in cash, 1.1million common shares and the right to draw from a pool of more than 5.6 million new shares which can either be held or sold to equity investors for $5.50 each.
In an interview, Stelco president Courtney Pratt said he's hopeful this version will be the one that finally ends the company's long nightmare by letting creditors choose how they will be paid.
"The changes are very specifically responding to bondholder concerns and give them the opportunity to take shares rather than cash," he said. "They have the option with this plan."
While Stelco's bondholders helped negotiate the newest plan, Pratt said none had committed to supporting it. "Right now, I don't know what the vote will be, but I am hopeful that we'll get a yes vote because we've listened and we've restructured the plan," he said. "I hope these changes will be what's required to get us a yes vote but it's still possible that this plan could be further amended before we take the vote."
Under Stelco's bankruptcy protection, creditors holding two-thirds of its $640-million debt must vote in favour of a restructuring plan which will then be taken to Superior Court Justice James Farley for final approval. Failure to get creditor support could result in a court-ordered sale of the company or a push into receivership by operating creditors if the protection order is not extended at the company's next court appearance on Monday.
Court documents for the sale have been prepared by the United Steel Workers and the motion for a receiver has been filed by Stelco's operating lenders, owed about $217 million.
The pool of new shares to be offered creditors was created by Tricap Management Limited and two investment partners agreeing to give up some of the stake in Stelco they were to get in exchange for lending the company $375 million. Those investors have agreed to buy almost 19.4 million new Stelco shares for more than $106.5 million to prime the pool from which creditors will draw. Any shares left in the pool by creditors will then be purchased by the investors, potentially topping the fund up to $137.5 million.
Elements unchanged from previous plans include paying $400 million toward Stelco's $1.3-billion pension deficit and providing money for new equipment the company says is vital to reducing its production costs. Much of the pension downpayment will come as a forgivable loan of $150 million from the provincial government. Ottawa is also kicking in $30 million for energy projects.
The balance of the pension shortfall will be settled over 10 years with annual payments of $65 million for five years and $70 million for five years starting in the second half of 2006.
Existing shareholders get nothing. Voting on the new plan will be conducted at the International Centre in Mississauga, starting at 10 a.m. In a letter to employees yesterday, Pratt said failure to reach a deal doesn't mean plant gates will be locked immediately and "your wages, benefits and other terms of employment will continue in their current form.
Stelco's directors Wednesday rejected a plan put forward by bondholders. That would have seen Tricap allowed to buy 10 million new shares for $5.50 each. That money would go to creditors along with 15 million shares which senior debenture holders could then buy for $5.50 each. Creditors would also share in $275 million of secured notes and an additional 1.1 million common shares.
If Tricap dropped out of Stelco's refinancing, the bondholders offered to arrange their own package. In another development yesterday, Stelwire workers in Hamilton voted 95 per cent in favour of a deal with the plant's new owner. Stelwire, with plants in Hamilton and Burlington, is one of the subsidiaries being sold by Stelco.
The pact will see the company's Burlington operation close and work consolidated in Hamilton. It includes an early retirement incentive that will allow workers age 55 with 15 years service to leave with a full pension.
"People are happy with this because we're going to restructure and put the business back on its feet," said union president Scott Duvall. "We're sad to be leaving the Stelco chain after 50 years, but we know we have to move on. Settling this will be a real burden off people's minds."